I
am constantly amazed that an automotive manufacturer will design and market
vehicles with top-end speeds of 250kph+ MPH and 0-100 speeds in the sub 4
second range. Don’t get me wrong, I own three vehicles with 5.7L Hemi engines
so I love powerful vehicles. However, considering the top legal speed in most
of the countries is 120kph and most stop and go driving takes place where speed
limits are less than 70kph, a driver rarely gets the opportunity to experience
a vehicle’s true performance.

Viewing unconstrained versus constrained vehicle
performance is similar to what supply chain professionals deal with when
planning the supply chain. Today, many supply chain planning processes
only consider unconstrained supply capabilities. The plan assumes any demand
for a product or service can be met. There are no constraints. Maybe on the
autobahn in Germany, this unconstrained view makes sense, but when speed limits
or constraints exist, what is feasible is more important to synchronizing and
aligning your end-to-end supply chain.The objective of constraint-based supply
planning is to derive an optimal time-phased replenishment plan for all
item/locations that achieves desired customer service while respecting
inventory policies and real-world constraints at all echelons of the supply
chain. The inputs to constrained supply planning include supply chain
constraints, supply chain status and business rules. Constrained supply planning
provides supply chain KPIs, exception alerts, feasible supply plans, and the
planned purchase orders, transfer orders, production orders and VMI orders
required to execute the plan. Constraint-based supply planning is vitally
important because it provides a feasible plan that is actually executable.

There are three main types of constraints to
consider when developing a feasible supply chain plan; Production
Constraints, Flow Constraints and Storage Constraints. These three types of
constraints should be determined at every point along the extended supply chain
to ensure an optimal and feasible supply plan. This leads to the need to
consider many constraints including:

Supplier Constraints:
capacities and order minimums/maximums

Manufacturing Constraints: multi-stage production limitations, min/max batch
sizes, capacities, working days and hours, and availability of specific
skills.

Building and
maintaining a comprehensive constraint-based supply chain planning capability
is an evolutionary process. To be successful it is best to start small and
build towards more mature capabilities. Most companies that build
constraint-based supply planning capabilities have already developed
functioning demand planning and inventory planning. Many of these will also
take the intermediate step to develop an unconstrained supply planning
capability first before moving forward with constraint-based planning. Taking a
crawl, walk, run approach builds experience to determine what capabilities are
important and provides time for supply chain personnel to grow and learn at an
appropriate pace. The key though is to get the journey started towards
constraint-based supply planning.The ultimate goal of a supply chain organization
is to meet customer requirements while minimizing total supply chain costs.
That can only happen by considering the entire end-to-end supply chain as an integrated
system and optimizing that system. This was not possible just 10 years ago, but
today it is due to improvements in computing power and the availability of next
generation supply chain planning systems. Developing a constraint-based supply
planning capability may seem daunting. However, keep in mind that companies
that take this journey see significant improvements in customer service and
reductions in total supply chain costs while taking a giant leap towards
optimizing their supply chain.Where are you in your journey to
constraint-based supply chain planning?

Article contributed by Logility. The original article can be
found at www.logility.com

Disclaimer: The information and opinions expressed in this website and the Supply Chain Update newsletter in no way constitutes professional advice and does not necessarily reflect the views and opinions of the editor and staff of Supply Chain Update or Vicenda.